Real After Tax Term Deposit Returns for Australian Savers are Negative; Savers Punished. Debtors Rewarded. Tax and Inflation Work for Borrowers and Against Savers.
Tweet Topic Started: 6 Mar 2012, 11:00 AM (20,802 Views)
This chart shows the real (inflation adjusted) after tax returns on term deposit accounts for Australian savers. Savers who leave their money languishing in bank accounts are obviously being severely punished for their foolishness. The effective return on their capital is zero to negative.
Meanwhile, sensible homeowners enjoy capital gains, no rent to pay, stability of tenure, negative gearing benefits, and inflation reducing the real value of their home loans, leading to a comfortable rent-free, debt-free, asset-rich retirement. No wonder so many smart people aspire to home-ownership.
Nice chart, I guess sticking to art and coins is the best bet, with the AU so high its almost a 20%-30% discount on these items when buying from overseas. If you buy correctly (not buy a fake) then you are certain to come out on top when you go to sell.
Meanwhile, sensible homeowners ( BANK DEBTORS ) enjoy ( NO) capital gains, no rent to pay (INTEREST ON THEIR DEBT ), stability of tenure(UNTIL DEFAULT), negative gearing benefits(NOT FOR HOMEDEBTORS), and inflation reducing the real value of their home loans(RENTS DECREASING IN REAL TERMS), leading to a comfortable rent-free (MAINTENENCE, RATES ON A PENSION)debt-freeUNTIL YOU ARE NOT), asset-rich retirement(YOU WISH)
You like stirring the hornets nest don't you Shadow?
Fuck that, I like hitting it with a stick :lol:
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
'We Wish Like Hell We Had Never Bought': Voices from the Housing Crisis
I am 32; my wife and I bought our house five years ago. And this is what I tell my friends and colleagues at work who are my age or younger and thinking of buying a house or condominium: Don't.
On paper, at least, my wife and I are perfect home-owner candidates: Married, taxable income hovering around $100K, parents of 2 children, owners of 2 dogs. We both hold master's degrees, she owns her own business, I work a unionized job. Our only debts are our mortgage, one car payment, and a loan from my father that carries no interest. Between that latter loan and an inheritance I received, we put down fully one-third of the cost on our 1,100 square-foot, three-bedroom home in San Jose, California.
And we wish like hell we had never bought.
We are tied to a place that is prohibitively expensive to live, requiring both of us to work instead of one parent staying home. Homes require constant upkeep and expense. Psychologically, young buyers like us fail to truly do the math on property taxes, homeowners insurance, flood insurance, earthquake insurance, plumbing, yardwork, general maintenance, drainage, so on and so forth. Young couples buy what we can afford, not what we will need: our home is too small now that we have added a second child.
To my friends and colleagues I say, "Think about where you want to be in fifteen, twenty years. Is it in that neighborhood? In this city? Will you have children? How many do you want or might be possible? Do you want pets? What do you want nearby? How does it factor into your costs now, and in twenty years when retirement and paying for college are no longer distant abstracts?
"Do not buy a house until you can afford one with all those other considerations factored in."
And with stagnating wages, high unemployment, and job mobility -- what if your company picks up shop and tells everyone it's time to move to North Carolina or lose your job? -- as daily concerns, the last fucking thing a young couple should be thinking about is buying a goddamn house.
I am 50 years old, divorced without children or other immediate family obligations, and within two years of paying off my mortgage. I'm doing it Dave Ramsey-style: throw pretty much every dollar I can at the mortgage to get the hell out of debt as fast as possible. The mortgage is the last debt I have. I'm disciplined but lucky. Very lucky. Still...the house is as much an albatross as a home. Almost unsellable in the current market, and my neighborhood shows signs of serious distress as vacants accumulate and rentals accumulate.
I recently tallied up all invoices for repairs and updates since I bought the house in 1997. A few were optional, but for the most part not. As an investment my house is a disaster. If I had continued to rent and saved the money that has gone into mortgage, taxes, and upkeep, I would have quite a pile of cash. Now, with the economy as it is and will likely be for some time to come, my best self-defense is to carry no debt and save what I can. If inflation picks up a lot, then my savings are screwed. But, then, so will everyone's.
If you're thinking of buying a house, just remember that there is probably a sizable pile of bullshit in any justification or encouragement offered by the real estate industry and financial industry. Make sure that owning a house really does mesh with your values and what is truly important to your family. As a purely financial matter, buying a house is a largely ridiculous proposition. Maybe the economy will turn around and the equation will become more favorable, but be very mindful before you make that bet.
I personally believe having a PPOR is definitely the right way to go, and maybe even an IP in the area/sector that you might consider for retirement.
However you cant get away from the feeling that these prices are just too high and that they've been pushed there by a generational debt bubble which now must slow down. Whilst they're not going any higher, theres therefore no rush. If they come down more, great. If they flatline, nothing lost (well, apart from the extra time renting but the interest on the deposit, the saving on renting v buying and the savings on expenses cover some of that).
Even if it was so 0% on cash looks pretty good versus leveraged losses on property.
Despite the obvious trolling, Shadow does raise an interesting point, which is where are people investing in the current market. Are there gains to be had, or is it simply a case of wealth preservation at this point?
Despite the obvious trolling, Shadow does raise an interesting point, which is where are people investing in the current market. Are there gains to be had, or is it simply a case of wealth preservation at this point?
Paying down debt (non-deductible debt first) is generally a good investment during economic turmoil, as you get a real return of the interest rate of the debt being paid, with no taxation to worry about. When times are good, back into the more traditional asset classes.
Paying down debt (non-deductible debt first) is generally a good investment during economic turmoil, as you get a real return of the interest rate of the debt being paid, with no taxation to worry about. When times are good, back into the more traditional asset classes.
What about those with no debt. Like Bubblelicious, I'm curious whether people are trying to find gains now or just preserve wealth. If its the latter, than a term deposit is doing a great job.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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